Deals on wheels: Should you buy your child a car?

Editor's note: This article originally ran on the personal finance blog Get Rich Slowly. It has been reprinted here with permission.

As far as I know, only one reader of Get Rich Slowly knows me personally. And last week, I was having lunch with my one-person fan club. (Actually, I am not sure she’s even a fan, but she did buy my lunch. Thanks, Lisa!)

“You really stirred up some controversy with one of your recent posts,” Lisa said, a forkful of salad in hand.

“Yes, that’s the one. You know, it really made me think.” Without telling me her opinion on the subject, she said, “What do parents really owe their kids? Financially speaking, of course.”

“I actually wanted to write a blog post on that.”

Though Lisa and I went on to talk about all the financial gifts parents can give their children (we decided that parents taking care of their own futures is a great gift to give their children), this post is about cars. Should parents pay for their children’s transportation costs or not?

A car with strings attached

When I turned 16, I immediately got my driver’s license. I arrived home with a plastic ticket to freedom burning a hole in my wallet. As I understood it, I would be allowed to drive the family car, so I was totally surprised when my mom said my birthday present was parked out behind the garage. Even though my heart rate increased, I tried not to show my excitement as I nonchalantly walked outside to find a small matchbox car “parked” in the snow. Ha ha. Very funny, Mom.

So, back to Plan A. Yes, I would be allowed to drive the family car. Yes, my parents would pay for the insurance and repairs, as long as said repairs were not from my own irresponsibility. I would pay for the gas, and I would have to forfeit the family car to my sister as soon as she turned 16. That gave me 22 months to save up for my own car.

“The hard part of this deal,” my dad said, “is that the car is the bargaining chip. When you get grounded, you’ll get grounded from the car. We will pick you up from work, and you’ll have to find your own ride to school or ride the school bus.”

Not that I ever experienced that part of the deal or anything. Ahem.

My husband had a different experience. He had to buy his own car right away and pay for everything. Like most things, we each think the way we were raised worked out best for us. And that always makes for interesting discussions.

Transportation valuation

The way I see it, we have three options:

1. Buy and give a car to our kids. Pay for everything.

Pros — This gives you an opportunity to pick out the car. It should be something that is reliable, getting up in years, and something low on the cool-meter. I think a four-door sedan that their grandparents would drive is a good choice. Buying the car also allows your child to save money for something else.

Cons — Is it necessary and the best use of the family budget? Would the child take care of it as well as if the child had had to pay for it him/herself? Does this help the child to manage money better or not?

2. Allow our children to use our car like my parents did, but pay for all (or some?) expenses, other than gas.

Pros — The child has a longer time to save up money for other expenses. It’s a good “bridge” between learning to care for a car, pay for gas, and buying his or her own car. It also is a privilege that can easily be removed. (My husband argues that driving privileges can be removed, no matter who owns the car. He is right, of course.)

Pros — The child would fully grasp the whole cost of car ownership. I believe this scenario is the one in which the child would take the best care of the car.

Cons — This would require having a cushion in case of unexpected repairs, and careful budgeting to make sure the child can afford all the expenses associated with car ownership. (WOW! This sounds suspiciously like real life!) It does not allow them as much time to save for other expenses.

(As I have mentioned before, we live in a rural area. If you can live without your teenager using a car, that’s great! It would be doable in our case, but not convenient.)

As I look over this list of pros and cons, I am leaning toward something that’s between the second and third options. I would be fine with allowing the child to use our car, but it probably would be more helpful if they had to pay for the gas and a percentage of repairs and insurance. I know I was surprised at how much oil changes, new tires, and wear and tear repairs added up to once I bought my own car.

While we have at least six years to make this decision — and I don’t want to speed this up at all — I would like to start prepping our kids with our expectations so they aren’t surprised when I tell them their birthday present is parked by the garage.

Would you buy your child a car? If so, would you expect the child to pay for any expenses?